Policies and Procedures

The concepts of allowability, allocability, and reasonableness of costs address the legitimacy of a cost charged against a specific sponsored research award and are defined and determined by the Office of Management and Budget (OMB), the sponsor’s requirements, and/or college policy.

Alongside the principal investigator, Research Administration Services and Grant and Contract Accounting ensure that the costs charged to the sponsored research award are reasonable, allowable, and allocable based on federal cost principles, guidelines of the sponsoring agency, and/or college guidelines. 

Allowability

Definition: Legitimate and permissible allowance of grant activity and related costs.

Expenses charged to a sponsored research award must meet the following allowability criteria:

• The costs must be in line with the programmatic or research requirements of the grant being charged
• The costs must be given consistent treatment through the application of generally accepted accounting principles appropriate to the circumstances
• The costs must conform to any limitations or exclusions set forth in the sponsored agreement or in the Federal Cost Principles (OMB Uniform Guidance §200.403)

Example: A principal investigator did not budget for any equipment failure, but their existing laser broke and the grant project is stalled until it is fixed. The active grant has a materials and supplies budget that seemingly could support the cost of the laser’s replacement parts. Allowability would be determined by the sponsor’s defined budget terms and conditions (or agency regulations), and whether or not the replacement parts fall into the defined materials and supplies category.

Allocability

Definition: Grant costs are distributed in an equitable manner to align with the direct involvement of a project.

Allocability ensures a cost has been incurred solely to support or advance the work of a specific sponsored research award. It also means that the process of assigning a cost, or a group of costs, to one or more cost objectives in a reasonable and realistic proportion to the benefit provided or other equitable relationship.

Example: A research grant requires particular chemicals for testing. The chemicals will only be used for this particular project, so the cost is allocated 100 percent to the grant. Conversely, if the chemicals were to be used for multiple grant projects the expense would need to be allocated to all the awards benefiting, in a proportionate manner to properly reflect true use and allocation. 

Reasonableness

Definition: Using sound judgment with a fair and sensible approach for reviewing and approving grant financial activity.

The cost must be able to withstand public scrutiny and withstand internal and external review against Federal Cost Principles.  Additionally, preferred vendors and reasonable pricing for goods and services should be engaged to prevent needless spending on the grant.

Example: A principal investigator (PI) needs to travel overseas in order to present their research at an international conference. Upon choosing a flight, the PI sees two flights with similar departure and arrival times. One flight is one hour shorter than the other but costs an additional $750 and would slightly exceed the existing travel budget. The reasonable expectation is to engage cost savings and conduct prudent spending wherever possible.

2 CFR Part 200, Subpart E—Cost Principles of Uniform Guidance

Illinois Institute of Technology receives substantial funding in the areas of sponsored research, education, public service and other funding agencies. The University ensures all cash payments are billed out and collected in a timely and efficient manner thereby improving cash availability.

The purpose for the Policy is to provide guidance to Principal Investigators (“PIs”) and others responsible for the administration of sponsored projects on the requirements related to budget revisions to assure compliance with regulations, sponsor terms and conditions, and applicable cost principles.

The purpose for the Policy is to provide guidance to Principal Investigators and others
responsible for the administration of sponsored projects on the requirements related to salary and non-salary cost transfers to assure compliance with regulations, sponsor terms and conditions, and applicable cost principles.

Deficits within sponsored project funds are not permitted.
Deficits due to overspending will require a departmental/PI fund to offset the deficit before the grant is closed. If the offset fund is not supplied within 90 days of notification of the deficit, Grant and Contract Accounting (GCA) will automatically charge the department account with the deficit expense.
Awards that are not terminating, but are in deficit will have until the end of the fiscal year to be resolved, whichever is sooner.
Surpluses from fixed priced awards will also be held until the deficit is resolved. Exception: Multi-year awards may be carried forward with a deficit if the guidelines per the award have been followed and new funds will be forthcoming.

Cost-sharing represents that portion of the total project costs (direct or indirect) of a sponsored agreement borne by the university, rather than by the sponsor. There are three types of cost-sharing that are described below.

Types of Cost-Sharing

Mandatory Cost-Sharing

Mandatory cost-sharing is that portion of the university’s contribution to a sponsored project, which is required by the terms of the project. It must be included or a proposal will receive no consideration by the sponsor.

Voluntary Cost-Sharing

Voluntary cost-sharing represents resources offered by Illinois Tech in sponsored project proposals when it is not a specific sponsor requirement.

Voluntarily committed cost-sharing is defined as those resources that are committed and budgeted for in a sponsored agreement.

Voluntary uncommitted cost-sharing is defined as a university faculty effort that is over and above that which is committed and budgeted for but not charged to the sponsored agreement. Voluntary uncommitted cost-sharing should not be recorded as organized research.

In both mandatory and voluntary cost-sharing when an award is received in which cost-sharing was proposed, the cost-sharing becomes a binding commitment that the university must provide as part of the performance of the sponsored project. Failure to properly record cost-sharing may result in audit findings that could result in audit disallowances that have to be refunded to the appropriate sponsor.

Funding, particularly when received from a nonprofit entity (i.e., foundation, corporate foundation, private organization, or corporation) is sometimes difficult to classify as either a gift or a grant.

The following indicators should be taken into consideration during the review. The presence of any single factor does not represent the condition of a gift or grant; rather, all factors should be considered together.

Gift

• An unconditional voluntary transfer to the university
• The university has complete discretion in the use of the funds, or the use is for general support for a specific area or purpose
• Beyond a designation of the use, the donor does not impose contractual requirements on the award
• Any subsequent reporting on the use of the funds to the donor is not a condition of the receipt of the funds
• Absence of “quid pro quo”

Grant (Sponsored Research)

• Characterization of the donor/grantor—if the transfer is accompanied by donor/grantor language that characterizes the transaction as a “grant” or “contract,” it is evidence that the donor/grantor expects something in return for the transfer. Therefore, it is evidence of sponsored research
• The award/transfer binds the university to a set of terms and conditions
• The award is directed at satisfying specific grantor requirements
• The transfer was solicited through written proposals that include deliverables
• The university must maintain compliance with an approved line-item budget
• Deviations from the originally approved budget must be approved by the grantor
• A product is returned to the grantor, or the grantor maintains any level of exclusive use of any product that resulted from the transfer, even if the exclusivity is temporal and not in perpetuity
• Unexpended funds must be returned to the grantor
• There are provisions for audits by or on behalf of the grantor
• The transfer obligates the recipient to submit detailed financial reports, which may be required periodically or upon completion
• The transfer obligates the investigator to report project results or convey rights tangible or intangible properties resulting from the project. Examples of tangible properties include, but are not limited, to equipment, records, technical reports, theses, or dissertations. Intangible properties include rights in data, copyrights, or inventions
• The agreement seeks considerations such as indemnification or imposes other terms that require legal accountability
• The agreement binds the investigator to a line of scholarly or scientific inquiry that follows a plan provides for systematic evaluation or seeks to meet stated performance goals
• The grantor places restrictions on the publication of data from studies supported by the transfer, even if the restriction is temporal and short-lived
• Studies are performed on substances/products/processes, etc. that are owned or controlled by the grantor
• The donor/grantor retains the right to revoke the award

The below criteria may assist in determining the appropriate fund classification.

The purpose of the Policy defines the process for all those that request, create, and approve grant related expense transactions. This policy also clarifies the regulations, restrictions, and documentation required for federal grant expenses, which consistently is applied to all grant expenses at the university. Several methods for purchasing exist at the university and are further defined within this policy.

The purpose for the Policy is to provide guidance to Principal Investigators (“PIs”) and others responsible for the administration of sponsored projects on the internal procedures that speak to roles, responsibilities, controls, and approvals for Grants and Contracts Accounting, as well as Research Administrative Services.

The Federal Demonstration Partnership prior approval matrix is a quick reference guide when managing federal awards. Note: the terms and conditions of a specific award take precedence. If you need assistance, please contact osrp@iit.edu.

Re-Budgeting

The principal investigator or project director is charged with the responsibility of establishing a project’s operating budget and maintaining it within the limits set by the sponsor for the period(s) of the project. Limitations on the re-budgeting of project funds, and requirements to be met in re-budgeting such funds, vary across sponsors. General reasons that may require re-budgeting would include:

• Change in effort/months of key personnel (including principal investigator)
• Need or increase in equipment
• Change in overall scope of work
• Change in subcontract
• Need for additional funds
• Consultants (if not specified in the budget)

No-Cost Extensions

No-cost extensions are necessary when a project is reaching the end date of the award and it is determined that the project requires more time to complete all the specific aims noted in the proposal. This needs to be determined at least two to three months prior to the end of the award.

If re-budgeting or a no-cost extension request is necessary, please contact the Office of Sponsored Research and Programs to initiate the process.

Congress has historically passed a statutory restriction in the Health and Human Services (HHS) Appropriations Act that limits the maximum rate of compensation that can be paid to an individual to the Executive Level I of the Federal Executive Pay Scale. This “salary rate cap” limits the rate of pay directly chargeable to grants, cooperative agreements, and contracts issued by the National Institutes of Health (NIH), the Substance Abuse and Mental Health Services Administration (SAMHSA), and the Agency for Healthcare Research and Quality (AHRQ). For the current NIH Salary Cap Summary (FY1990–Present), please refer to this link: https://grants.nih.gov/grants/policy/salcap_summary.htm.

The portion of salary in excess of the rate cap is not allowable on NIH, National Science Foundation, and other federal awards. When an employee’s rate of pay exceeds the salary rate cap, the difference between what the employee would have earned at full pay and the maximum amount allowed under the cap for that percent of effort must not be charged to another federal award. The difference may be charged to a privately sponsored award only when specifically allowed by the private sponsor.

Salary in Excess of the Salary Cap

Salary amounts in excess of the NIH salary cap are considered voluntary committed cost-sharing. The associated fringe benefits and indirect costs are also considered cost-sharing.

Sponsored research travel will be subject to Illinois Tech’s travel policy unless more restrictive guidelines are noted within the award documentation or sponsor policy. It is important that principal investigators maintain documents for grant travel if that travel was purchased with a procurement card and not reimbursed by the university through submission of a Travel Expense Reimbursement. 

Fly America Act

Principal investigators who have received federal funding are required to comply with the Fly America Act.  A key element of the Fly America Act is the requirement to use United States carriers when flying to foreign countries. There are some exceptions so a review of the Fly America Act prior to planning foreign travel is encouraged.

Use of United States Air Flag Carriers

I.   Definitions

• The Fly America Act. 
  • The provisions enacted by section 5 of the International Air Transportation Fair Competitive Practices Act of 1974 (pub. L. 93-624, Jan. 3, 1975), 49 U.S.C. App. 1517, as amended by section 21 of the International Air Transportation Competition Act of 1979 (Pub. L. 96-192, Feb. 15, 1980). 94 Stat. 43.
• U.S. Flag Air Carrier.
  • An air carrier holding a certificate under section 401 of the Federal Aviation Act of 1958 (49 U.S.C. App. 1371). Foreign air carriers operating under permits are excluded.
• United States.
  • For purposes of the Fly America Act, "United States" means the 50 states, the District of Columbia, and the territories and possessions of the United States (49 U.S.C. App. 1301(38)).
• Gateway Airport in the United States.
  • The last airport in the United States from which the traveler's flight departs, or the first airport in the United States at which the traveler's flight arrives.
• Gateway Airport Abroad
  • The airport abroad from which the traveler last embarks enroute to the United States or at which the traveler first debarks incident to travel from the United States.

II.   General Requirements of the Fly America Act

The Fly America Act, 49 U.S.C. App. 1517, as implemented in the Comptroller General's guidelines, Decision B-138942, March 31, 1981, requires Federal employees and their dependents, consultants, contractors, grantees, and others performing United States Government financed foreign air travel to travel by U.S. flag air carriers: 

• Unless travel by foreign air carrier is a matter of necessity as defined in paragraph (b)(3) of this section, or
• When U.S. flag air carrier service is available within the guidelines in paragraphs (b)(4)(5) of this section.

III. Necessity for Use of Foreign Air Carrier Service

Use of foreign air carrier service may be deemed necessary if a U.S. flag air carrier otherwise available cannot provide the air transportation needed, or use of U.S. flag air carrier service will not accomplish the agency's mission.

IV. Availability of U.S. Flag Carrier Services

1. General. U.S. flag air carrier service is available even though: 
   1. Comparable or a different kind of service can be provided at less cost by a foreign air carrier;
   2. Foreign air carrier service is preferred by or is more convenient for the agency or traveler; or,
   3. Service by a foreign air carrier can be paid for in excess foreign currency, unless U.S. flag air carriers decline to accept excess foreign currencies for transportation payable only out of these monies. (See also paragraph (b)(5)(iv) of this section.)
2. Scheduling Principals. In determining availability of U.S. flag air carrier service, the following scheduling principals should be followed unless their application results in the last or first leg of travel to and from the United States being performed by foreign air carrier: 
   1. U.S. flag air carrier service available at point of origin should be used to destination or, in the absence of direct or through service, to the furthest interchange point on a usually traveled route;
   2. Where an origin or interchange point is not served by U.S. flag air carrier, foreign air carrier service should be used only to the nearest interchange point on a usually traveled route to connect with U.S. flag carrier service; or,
   3. Where a U.S. flag air carrier involuntarily re-routes the traveler via a foreign air carrier, the foreign air carrier may be used notwithstanding the availability of alternative U.S. flag air carrier service.
       

V.   Guidelines for Determining Unavailability of U.S. Flag Air Carrier Service

1. Travel to and from the United States: Passenger service by a U.S. flag air carrier will not be considered available when the travel is between a gateway airport in the United States and a gateway airport abroad and the gateway airport abroad is: 
   1. The traveler's origin or destination airport, and the use of U.S. flag air carrier service would extend the time in a travel status, including delay at origin and accelerated arrival at destination, by at least 24 hours more than travel by foreign air carrier.
2. Travel Between Two Points Outside the United States: For travel between two points outside the United States, U.S. flag air carrier service will not be considered to be reasonably available: 
   1. If travel by foreign air carrier would eliminate two or more aircraft changes enroute;
   2. Where one of the two points abroad is the gateway airport en route to or from the United States, if the use of the U.S. flag air carrier would extend the time in travel status by at least 6 hours more than travel by a foreign air carrier, including accelerated arrival at the overseas destination or delayed departure from the overseas origin, as well as the gateway airport or other interchange point abroad; or,
   3. Where the travel is not part of a trip to or from the United States, if the use of a U.S. flag air carrier would extend the time in travel status by at least 6 hours more than traveled by foreign air carrier including delay at origin, delay en route and accelerated arrival at destination.
3. Short Distance Travel: For all short distance travel, regardless of origin and destination, U.S. flag air carrier service will not be considered available when the elapsed travel time on a scheduled flight from origin to destination airport by foreign air carrier is 3 hours or less and service by U.S. flag air carrier would involve twice the travel time.
4. Travel Finances Solely with Excess Foreign Currencies: U.S. flag air carriers render themselves unavailable by declining to accept payment in foreign currencies for transportation services required by certain programs or activities of the Government which, under legislative authority, are financed solely with excess foreign currencies which may not be converted to U.S. dollars. In these instances, and notwithstanding the provisions of paragraph (b)(4)(I)(C) of this section, foreign flag air carriers that will accept the required foreign currency may be used to the extent necessary to accomplish the mission of the particular program or activity. The statement of justification required under paragraph (c)(3) of this section must indicate that the transportation service needed can be paid for only in excess foreign currencies and that otherwise available U.S. flag air carriers declined to accept payment in the foreign currencies.

Use of Foreign Flag Air Carriers

1. Authorization or Approval: Expenditures for commercial foreign air transportation on foreign air carrier(s) will be disallowed unless there is attached to the appropriate voucher a certificate or memorandum adequately explaining why service by U.S. flag air carrier(s) is not available, or why it was necessary to use a foreign air carrier. Use of foreign flag air carriers may be authorized or approved only when U.S. flag air carrier service is not available as determined under the guidelines in paragraph (b) of this section, or when foreign air carriers are used under the reciprocal terms of an appropriate bilateral or multilateral agreement as described in paragraph (c)(2) of this section.
2. Air Transport Agreements: Nothing in the guidelines in paragraph(b) of this section shall preclude and no penalty shall attend the use of a foreign air carrier which provides transportation under an air transport agreement between the United States and a foreign government, the terms of which are consistent with the international aviation goals set forth at 49 U.S.C. App. 1502(b) and provide reciprocal rights and benefits.
3. Justification Statement: A statement executed by the traveler or agency justifying the use of a foreign flag air carrier for any part of foreign travel must be entered on or attached to the travel voucher, transportation request, or any other payment document. Each request for a change in route or schedule which involves the use of a foreign flag air carrier must be accompanied by a statement justifying such use. The following is a guide for preparing the justification statement:
4. Employee Liability for Disallowed Expenditures: Where the travel is by indirect route or the traveler otherwise fails to use available U.S. flag air carrier service, the amount to be disallowed against the traveler is based on the loss of revenues suffered by U.S. flag air carriers as determined under the following formula set forth and more fully explained in 56 Comp. Gen. 209 (1977):
   
   Sum of certificated carrier segment mileage authorized (¸) Sum of all segment mileage authorized (x) Fare payable by Gov’t Minus (-) Sum or certificated carrier segment mileage, traveled (¸) Sum of all segment mileage, traveled (x) Through fare paid

Code Sharing

On September 25, 1991, the Comptroller General released a decision regarding the Code Sharing of flights by U.S. and foreign flag carriers utilizing the equipment of the foreign flag carrier. This is announced in Comp. Gen. File B-240956. The decision is as follows:

The question in this case, presented by the Department of State, is whether a U.S. flag air carrier's arrangement to provide passenger service in international air transportation on the aircraft of a foreign air carrier under a "code-share" arrangement with the foreign air carrier would meet the requirements of the Fly America Act, 49 U.S.C. App. 1517 (1988). Since it appears that such service generally would be considered to be service by a U.S. air carrier in international air transportation rather than by a foreign air carrier, that service should also be considered transportation provided by a U.S. air carrier for purposes of the Fly America Act.

On October 1, 1994, the National Institutes of Health (NIH) implemented the Streamlined Non-competing Award Process (SNAP). The grant mechanisms included in SNAP are administered under the Expanded Authorities’ provisions of OMB Circular A-110, which waives cost-related prior approvals. The prior approval authorities retained by PHS will remain in effect under SNAP.

The phases of SNAP are as follows:

• Phase I—simplified the requirements of the non-competing application process (1995)
• Phase II—the Notice of Grant Award was changed to reflect only direct and indirect costs, and indirect costs are now included in the future year recommended funding levels (1996)
• Phase III—Financial Status Reports (FSR) are required at the end of the competitive segment, rather than annually. FSRs will be required by NIH 90 days after the expiration of the competitive segment

Snap Eligibility

NIH grant recipients (including those participating in the Federal Demonstration Project) are expected to follow the streamlined non-competing process for mechanisms routinely covered under expanded authorities, except Program Project Grants (P01s) and Outstanding Investigator Grants (R35s). As published in the NIH Guide for Grants and Contracts, Vol. 23, No. 45, December 23, 1994, NIH routinely applies expanded authorities to Program Project grants (P01s), Minority High School Student Research Apprentice Program awards (S03s), Research Career Awards (K-Series), and all Research Project grants (R-Series), except Phase I Small Business Innovation Research (R43) and Small Business Technology Transfer (R41) awards.

Any award excluded from expanded authorities is routinely excluded from SNAP unless specifically included in SNAP as a term and condition of the award.

This policy applies to all sub-awards issued under any sponsored research awards made to Illinois Institute of Technology, and it seeks to ensure adherence by sub-recipients to the administrative requirements imposed by award sponsors’. As a condition of acceptance of awards from sponsors, the University is obligated in its role as the primary recipient of an award, to ensure sponsored research-
related activities comply with federal, state and local regulations or other grant terms and conditions as outlined in the specific award documentation.

This policy covers the summer salary paid from sponsored project accounts, such as federally funded research. For an individual to receive summer salary charged to a sponsored project account, that person must actually expend effort on research during that summer period as per the terms and conditions of the award. Individuals may not transfer effort from one month to another. Moreover, no vacation may be taken during time charged to a sponsored project account.

Step by step directions to use the time and effort reporting system

Costs considered “unallowable” must be identified and may not be budgeted, charged, or reported on any sponsored research awards (See OMB A-21, Part J). There are exceptions to these unallowable costs based upon the funding mechanism (i.e., program grants or center awards P41, etc) and the terms and conditions of the award. Please review the circular to review all costs that are allowable with their exceptions.

• Advertising and public relations costs
• Advisory councils
• Clerical/administrative salaries (including secretarial)
• Telecommunications
• Alcoholic beverages
• Alumni activities
• Bad debts
• Commencement and convocation costs
• Contingency provisions
• Defense and prosecution of criminal and civil proceedings, claims, appeals, and patent infringement
• Donations and contributions
• Entertainment costs
• Fines and penalties
• Fundraising and investment costs
• Goods or services for personal use
• Housing and personal living expenses
• Lobbying
• Losses on other sponsored agreements or contracts
• Pre-agreement costs
• Selling and marketing
• Student activity costs